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Interview

with Magne Ognedal, Director General, Petroleum Safety Authority

01.10.2012 / Energyboardroom

You have been the Directorate General of the Petroleum Safety Authority since 2004 and this is now your second term. Over your watch the injury rate for offshore drilling operations has fallen from 16.8 to 9.2 injuries per million work hours. What have been the most important steps that you have taken to making Norway a safe petroleum production environment?

The decisions we made in 1985 to reorganize the regulatory side of the business were perhaps the most important for everything that has followed since. The old petroleum directorate had a very central role in not only resource management but also safety. As a result of that reform in 1985 we changed the approach from prescriptive to functionality-based regulations. We formally introduced the concept of risk management in a special royal decree. There was a tremendous amount of reform done at this time, and we have built on that since. Of course the responsibility distribution that is evident in the regulation has also been a success story, but the challenge there was to make the organizations that should have responsibilities take them on properly, meaning oil companies, contractors and unions – they have not only rights but duties as well. To get this into practice took some time and effort. But those basic decisions made then were the most important for the further development and improvement of the industry. Of course, being a regulator, we also have to constantly follow what is going on in other countries for self-improvement.

We met with Statoil in China, we know that the Chinese authorities were very interested to know exactly the type of regulations and standards that had been imposed on the Norwegian shelf. We see the Norwegian model being exported to other countries; what was the Norwegian model itself based on?

We developed our modern way of thinking in the years leading up to the decisions made in 1985. At this time we were of great interest to many. Furthermore, regarding Lord Cullen’s investigation into the Piper Alpha catastrophe, this greatly increased the interest of our activities. I was a witness in this inquiry, and personally it felt more like a court case than a hearing. So I spent two days as a witness explaining the Norwegian approach that we were using at the time. A lot of the ideas we presented were adopted by the UK although these ideas were modified for their situation.

Why do you think Norway took health and safety and these types of environmental standards to such a great extent that they were being copied by other nations – why was it that Norway had the highest standards compared to any other offshore producer?

Since day one, safety has been a crucial issue in Norwegian petroleum activity and this has been clearly stated by parliament and government. Even today the government’s and parliament’s vision is that we shall be the safest petroleum country in the world. So we have to work towards that goal and of course everyone participating in the industry has to do their part.

Ms. Hilde Manetz and Leif Sande of two key energy workers’ unions talked about the role of the unions as something more pronounced in Norway than you see in many other countries and how this activity had helped to form and shape the Norwegian petroleum environment. Do you broadly agree with this?

I do. Regarding employers and employees and government, Norway has had a long tradition in which unions have a very clear role and they are listened to and they have rights in law. The role that unions and workers in general have, is very formalized. The PSA operate two tripartite arenas, one is called the safety forum – I chair that – and the other one is called the regulatory forum where we discuss adjustments to the regulations and all of this very openly, seek comments from employers and employees. Ultimately we decide what happens, but you involve them and that creates. It is a model that works very well, and to have the employers and employees on board helps the regulator a lot.

Bringing the clock forward from 1985 to 2010, of course we had the Macondo incident which has had a dramatic impact on offshore exploration throughout the world, no doubt this would have had a great impact in Norway, what would you say was the impact of this particular incident on shaping the Norwegian production environment over the past couple of years?

First of all, we had the Australian blowout and there wasn’t too much reaction to that. We started finding information from our colleagues in Australia but overall it didn’t cause too much of a stir here. Then Macondo happened, and that caused reactions here in Norway. There was a great deal of uncertainty among politicians, who asked whether we should stop deepwater drilling. My professional advice was that we should not do anything until we understood what went wrong, and while this discussion lasted from spring to summer, fortunately in the end we took no action. If I’m going to stop something I need a good reason to do it. As information started to come out, we started to digest the information to see if there was something in the way we worked that needed changing, should we adjust priorities, should we do something to the regulations, all these questions were coming up. The result of all the work we have done so far is that we don’t need to do anything to our systematic approach, we don’t have to overhaul the regulations, although there may be a couple of additions that we want to include but we haven’t completely decided yet. Now we are waiting for the Chemical Safety Board’s report so that will be the last one, and we will digest that one too.

How do you manage the balance effectively so that you have both safety and a market which is not overregulated?

An accident creates a discussion that could result in someone overreacting. It’s my job in the PSA to see every day that we do not overreact. We need to have good information and reasons for doing anything. It’s not as if something happens somewhere else, and therefore we need to immediately react and take action. We need to understand and evaluate the situation and based on that evaluation decide if we need to do something or not. Europe’s first reaction was to stop all oil drilling. Nobody did that. But it is precisely this sort of overreaction that implies that drilling activity here is inherently more dangerous. This is a risky business; it went wrong in the Gulf of Mexico and it can go wrong here, but it is this risk that needs to be managed every day.

Talking about risks, we are now seeing the revitalization of the Norwegian Continental Shelf. We are also seeing the oil patch extending further north to the Barents Sea with a whole new set of surface challenges created as a result. Do you see yourselves having to adapt to these new production environments or these new players in the market?

There are new risk contributors in the far north arising from the added factor of being surrounded suddenly by ice. But the regulations can stay the same. When you do the risk evaluations you have to take into consideration the new contributors. The risk perception changes but the regulation doesn’t have to change – these regulations already cater for this.

Ice is not predictable and in the North you have extreme weather conditions, darkness, environment issues, a need for better working clothes etc. From an emergency response point of view, we have to consider the issues of, for example, moving sick people into hospitals or blowouts. Companies are challenged to convince us that they can do their activities safely. We have to have basic knowledge about each risk contributor, and then technology must be examined carefully as well. The last issue is the competence and the capacity of the company that is going to operate in challenging conditions. Not all companies can do it.

Small companies must be pre-qualified and there exists a pre-qualification system in which we participate. When it comes to an actual operation, you need to demonstrate that you have the competence and capacity to carry it out safely because it is the operator that is ultimately responsible, not the contractor(s). We’ve had two cases over the last two years where we said no to a company for a lack of competence and necessary capacity. Those are difficult decisions to make, although the companies that we refused didn’t protest. They can appeal the decision but instead those companies are rebuilding themselves and will try again.

Do you see in these northern territories a potential for further collaboration with other countries interested in Arctic exploration from Canada to Russia?

The Arctic Council looks at certain issues, but that is a big group of people. We recently signed a bilateral agreement with the US oil and gas safety authority where we mention collaboration in the high north Arctic as an issue. We have colleagues in Canada in the two offshore provinces, and also the National Energy Board that has responsibility for the high north, so we will take some initiatives to work more closely together on arctic issues. In Russia there has been a collaboration project run by the DNV. Norway and Russia have been evaluating standards that the industry is using and determining their usefulness in the Arctic. I think in countries like the US, Canada and Norway, everyone essentially agrees that if something goes wrong in one country it will affect everyone else and therefore we must work together to avoid catastrophes anywhere, especially the Arctic. It’s an investment that everyone is willing to take so I see that as today’s attitude, which didn’t exist ten years ago.

What would you say is the main contribution to the PSA to generate safety innovation?

An example: In the early 1990’s the industry wouldn’t listen to us, so we used the regulations; we said the drilling process should be mechanized, not automatic. We gave the industry a five-year period to achieve this. When we put this into the regulations, there wasn’t any equipment available to do it. It was a costly move but a necessary one. The requirement triggered a lot of innovative people to create new technologies, and a number of businesses developed on this basis hi-tech equipment. There was a lot of protest of course, and we were blamed tremendously for cost inflation. Today mechanised drilling is the norm.

In terms of future regulations coming up in 2012 and 2013, do you see anything significant being added to the regulatory body for which companies would have to adjust?

There could be; there are a number of small but important issues, like improved clothing for working in the Arctic. A wave of new platforms and drilling rigs designed for the North will require new thinking and innovations, whether floating or fixed production installations. These projects might need new technology for safe activity and there are a number of similar questions that need to be answered.

So these innovations you probably see as being connected with this movement into the north of Norwegian production?

Yes, but then you have subsea innovations, and the goal of some companies is to have everything on the sea bottom including compressors. Subsequently, people will be asking what will be the next piece of production equipment that we can put on the bottom. It’s a much cheaper way of doing it than building a big platform. That’s the goal there and there are a number of individuals working in that direction. Statoil is a good example of technology development.

As a final question, what would you say was your personal ambition for maintaining safety on the Norwegian continental shelf?

I became director of safety in the old NPD just before Easter 1980. Two weeks later, we had the Alexander Kielland catastrophe. 123 people were killed, and that was a tough start as a safety director. That has been with me all this time and I feel it has been my personal duty to help any way I can to avoid something like that happening again. Even though I did not know any of the victims, this incident had a tremendous impact on me as an individual. So I am constantly working to ensure that this sort of event never happens again. Some of the decisions I have to make are challenging as a result, and often times I am criticized.

I believe that if the petroleum industry is going to have the room to operate and have the social acceptance of the industry, they have to invest more in prevention. When environmental activists protest about oil activities, it is not a direct result of these activities but rather due to the failure of the safety functions that should prevent oil from polluting the environment. It’s important to stress that the environment can be protected as well as humans if we invest a little bit more in managing the major risks that exist in the industry such as blowouts, fires, explosions, and other major hazards.

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